As any discerning investor will see, the gold and silver-backed tokens AUS and AGS are witnessing a significant increase in value. This comes as the news of the collapse of Silicon Valley Bank (SVB) led to a drop in the US Dollar Index (DXY) and a subsequent rise in the value of these tokens.
SVB acted conservatively in terms of fractional lending compared to other banks in the sector. Despite having a low-risk profile, the bank's collapse was due to the mismanagement of interest rate risk and long-matured debt holdings.
The tech industry, which benefited the most during the COVID pandemic, is now facing the brunt of the current inflationary and illiquidity cycle. SVB's concentration of customers in this industry saw a rapid reversal of net cash inflows, ultimately leading to the bank's collapse.
As bank shares fall worldwide, investors are scrutinising bank balance sheets to identify potential mark-to-market losses that may be lurking as an equity risk.
Asset prices are collapsing, affecting not only tech shares but other asset classes such as real estate and equities. The ongoing quantitative tightening and interest rate hikes are stripping liquidity from the market and impacting businesses across various sectors. Tech shares and the tech industry are being hit first, with real estate likely to follow shortly.
The trend across industries highlights the risks associated with higher interest rates and the potential for a big default cycle. Both Australia and the US have high exposure to interest rate rises, putting increased pressure on the equities and banking sectors.
The ongoing quantitative tightening and rate hikes are reducing bank deposits, forcing the banking industry to sell assets to allow for deposit redemption. In cases like SVB, this means selling long-matured bonds at a loss and raising equity to bridge the gap.
The potential for mark-to-market losses in the US banking industry is a significant concern. While the Fed has stepped in to save depositors, the pressure on bank shares remains. Small banks may be forced to raise more capital, leading to a vicious cycle. The SVB 'canary in the coal mine' might not be over yet, and the surge in AUS and AGS tokens reflects the market's response to this uncertainty.
In terms of crypto market analysis, Bitcoin prices are currently trading between several popular technical analysis pricing models. In February, prices encountered resistance at the 200-week and 365-day moving average, which was around US$25.0k. However, prices have recently rebounded off the 200-day and 111-day average, which is approximately $19.8k. This is the first cycle in history where BTC has traded below the 200-week MA, indicating new territory for the market.
In the past week, we have seen significant volatility in stablecoin prices, which can be attributed to fears of partial un-backing of USDC. This comes after the collapse of the LUNA-UST project, which has caused concern among investors and traders alike.
As a result of these developments, USDC traded down to $0.88 and DAI at $0.89 due to DAI's 65.7% backing by stablecoin collateral. This is a significant drop in value for these stablecoins, which are typically considered to be safe havens in times of market turbulence. However, the backing of stablecoin collateral has been called into question, leading to increased volatility and uncertainty in the market.
Gemini's GUSD and Paxos' USDP also deviated slightly below their $1 peg, further highlighting the instability in the market. Meanwhile, BUSD and Tether traded at a premium, with Tether seeing a premium of $1.01 to $1.03 for most of the weekend.
The Gold & Silver Standards AUS & AGS tokens.
Unlike other stablecoins that are backed by fiat currency or nothing at all, Gold and Silver Standard (AUS and AGS), our gold and silver-backed tokens, are the most transparently backed tokens in the digital asset industry. At any time, you can audit the blockchain to see that the number of tokens minted correlates to the amount of gold and silver held in the Reserve Vault. Each bar on the database is checked by a globally respected assurance firm to ensure both the weight and serial numbers recorded on the database match what is stored in Reserve Vault. A report of factual findings is produced for anyone to see at any time – available on this website.
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